What is Vacation pay?

Under Canadian employment standards, employees earn both vacation time and vacation pay. In most provinces the minimum is two weeks of vacation with 4% vacation pay, rising to three weeks and 6% after five years with the same employer. Saskatchewan starts at three weeks (3/52 of wages), and federally regulated employers give two weeks after one year, three after five and four after ten. Employment contracts can be more generous, never less.

Vacation pay is calculated on vacationable earnings, which usually include regular wages, overtime and holiday pay but often exclude certain discretionary bonuses or expense reimbursements; the definition varies by province. Employers either pay it on each cheque (common for part-time and casual staff, where allowed) or accrue it and pay it when the employee takes time off. Either way, accrued vacation pay is a liability on the balance sheet.

When employment ends, all accrued and unpaid vacation pay must be paid out, typically with the final pay, and it appears on the Record of Employment. Tracking vacation owed in dollars, rather than just days, avoids disputes when wages change during the year. Québec, Ontario and other provinces also have specific rules about when vacation must be scheduled and how long it can be deferred.